The fact that a society's production possibilities curve is bowed out or concave to the origin of a graph demonstrates the law of?
increasing opportunity cost. The opportunity cost of producing each additional unit of product X increases.
The fact that a society's production possibilities curve (PPC) is bowed out or concave to the origin of a graph demonstrates the law of increasing opportunity cost.
Explanation:
The production possibilities curve represents the various combinations of goods and services that a society can produce with its available resources and technology. It illustrates the trade-offs a society faces when allocating its resources between the production of different goods.
When the PPC is bowed out or concave to the origin, it means that the society's resources are not equally efficient in producing different goods. This indicates that the opportunity cost of producing more of one good increases as more of that good is produced, resulting in a trade-off.
The law of increasing opportunity cost states that as a society produces more of a particular good, the opportunity cost of producing an additional unit of that good increases. This is because resources are better suited for the production of some goods over others. When resources are shifted from the production of one good to another, the resources with the highest suitability for the first good are used first, meaning that as production of that good increases, less suitable resources need to be utilized, resulting in diminishing returns and higher opportunity costs.
In simpler terms, the law of increasing opportunity cost suggests that to produce more of one good, society must sacrifice increasing amounts of the other good. This is because the most productive resources are allocated to the production of the initially preferred good, and as more resources are shifted towards it, the resources that are less productive in that area are utilized, resulting in a higher opportunity cost.
To summarize, the bowed-out shape of a society's PPC illustrates the law of increasing opportunity cost, which highlights the trade-offs and diminishing returns associated with allocating resources between different goods and services.